more on the MN Budget Surprise

Here are a few reactions to today’s MN budget news that I think are worth sharing. It’s worth taking a minute to think about why we in Minnesota went from a projected $5B deficit to a projected $876M surplus for the current biennium. We’ve had our fun on the subject (see the previous post) but, really, what happened?

Sarah Kliff at Wonkblog offers two reasons. Minnesota is doing pretty well economically, at least comparatively. And we have cut spending, especially on health care, and partially by jumping on the Affordable Health Care Act’s requirements.

State officials chalk a lot of the good news up to factors specific to Minnesota. The state has seen its revenue increase as its unemployment rate is lower than the national average. The state has, for example, regained about a third of the jobs lost since the recession began. Nationally, that number stands at 22 percent.

Minnesota has also cut its spending, particularly on health care, in unique ways. It’s one of just four states, for example, to expand its Medicaid program in advance of the health reform law’s required expansion. For doing so, it’s received a higher Medicaid matching rate for some patients from the federal government.

Kliff continues that this is not particularly unique to MN, and that budget outlooks are rosier for many states across the nation, and that news could be harbinger of lighter budget pressures for state governments.

The other important factor will be how this budget forecasts re-shapes the budget fight between Governor Dayton and the MN legislature. All the arguments have to be reassessed when billions in the hole becomes millions in the coffers, including the cantankerous Vikings stadium debate and the unfortunate school shift that occurred to cover the deficit. At the Star Tribune, the problem has been noted.

The surplus will turn the traditional budget fights on their head. Earlier this summer, legislators beat down a $5 billion deficit to end a 20-day state government shutdown. Now, Republican lawmakers and the DFL governor may have to fight over how and whether to spend the windfall, bank it for troubled times or pay back a school shift that rankles all sides.

Come February, the budget picture will get even clearer. But for today, we’ll take a bit of positive economic news.